Insolvencies of breweries triple in the last year – brewers fail as inflation bites

Paul Maloney, Associate Director at Mazars, says the insolvencies are largely of smaller craft breweries who have suffered from an oversaturated market and from rising overheads.

Paul Maloney explains that even without the cost-of-living crisis there would have been a major shakeout in the market, as the boom in craft brewery start-ups meant that there were too many breweries competing for limited shelf space in supermarkets and bar space within pubs.

Paul Maloney says:

Craft breweries have been struggling for some time but rising prices have brought their financial challenges to a head.

Smaller brewers have struggled with a change in consumer spending when it comes to beer as the cost-of-living crisis has deepened. As inflation has risen and remained high, consumers have looked to cheaper options.

Says Paul Maloney:

Craft brewers often offer ‘premium’ beers, but consumers are turning to cheaper options. As such, discounted brands produced by large international brewers and supermarket own brands are increasingly the choice for consumers.

The craft beer market became heavily overpopulated over the last decade. The cost-of-living crisis now means many of these brewers are fighting for a place in a shrinking market. Some of them will not make it.

Small breweries often suffer from limited routes to market, lacking proper distribution channels to consumers. These smaller companies often do most of their business within local communities, relying on taprooms and supplying to local “bottle shops”. That has limited the turnover of many craft breweries, meaning that many were not able to reach breakeven.

The craft beer market has also been oversaturated for the last few years following a boom in demand for craft beers encouraged entrepreneurs to launch their own breweries.

Examples of breweries that entered administration in the past year include Tyne Bank Brewery, which was funded through a crowdfunding campaign in 2015/16 and had contracts with Morrisons and the Co-op. London-based Boxcar Brewery also called in administrators due to an “unworkable situation” with landlords and debt issues.

*Source: Insolvency Service

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